It has always been a question of how to learn to handle money. There is no institution that teaches about money management. Sometimes you develop money habits that aren’t real because of the way you were raised, what you learned from friends, random internet searches etc. There are some lessons that everybody should learn because once adopted, these will never make you feel sorry for poor money management.
Know how to budget:
Budget forms the foundation of a financial plan, it helps you to reach your financial goals by making most out of your money. You have to be fully aware of how much money is coming in as it will help to create a proper budget. People either use their net income as the starting figure or use the gross income. Then you are supposed to list all the expenses to have an idea of where the money goes. Once done with the list of expenses, you need to track your spending for a month in order to compare it with your budgeted amounts. I will help you to get an idea where you can reduce your spending.
Importance of emergency funds:
You should never deny the importance of an emergency. It helps you to cover the unexpected expenses with your savings. An emergency fund in actual should be enough to cover four to seven months’ worth of expenses. This money should be safely saved in a saving or a money market account. These are the kind of accounts that offer a return on your money and are easily accessible in case of an emergency.
Saving for retirement:
Saving for retirement is an important part of the financial strategy because it is not possible to work until the end. You need to keep a check on how much money you are setting aside for the retirement plan. For 401(K) the maximum contribution amount is $18,000 in 2017 and in 2018, it is expected to be $18,500. You can contribute to paying an additional $5,500 outside your workplace plan.
Commit to pay every bill on time:
If you haven’t paid your bills on time, chances are your credit score will be low. Check your credit report for the money drainers including identity theft. Keep the balance low by paying off your debts and focus on the immediate payment and getting rid of them as soon as possible.
The devastating financial losses cannot be covered with your emergency funds. Therefore, it is very important to get insurance. You can add a personal umbrella by assessing what you can afford with high limits of loss. Choose something that is cost-effective and can provide protection if you face huge losses.
Via: Business Insider